Glad you're back!

Rep. Barney Frank, Chairman of the House Financial Services Committee wants more regulations for wall street, and to pass laws "addressing" executive compensation.  I'm guessing "address" here means limit.

Obama's 'banking czar' Paul Volcker has his reform proposal, and it seems everyone in the country who doesn't make as much money as wall streeters or bankers wants them to make less.

I think truly those people would probably be happy if they made more, but since most of us  don't see million dollar bonuses in our futures, we think about how much those guys are making.  Especially since most of them are still making it and some of us are making nothing.

We have a couple of issues here - everyone is unhappy, and with reason, over what the financial markets have managed to do to us, and at the same time, do for them.

So lets look again at what they did:

At the most simplistic level:

1. They came up with dozens of ways to make money - they came up with new products to sell to everyone from other investment banks to institutional investors, to those people who had never paid a bill in their life, but still wanted to own their own homes.
2. They did this with encouragement from the Clinton Administration (changes to Fannie/Freddie guidelines to assist more people into home ownership)
3. They did it with help from the Federal Reserve (who kept credit really really cheap, not just for institutions, but for EVERYONE in the country)

Am I okay with it?  Hardly.  My life has been turned inside out.  But I believe that the people who are trying to FIX this problem don't understand exactly how we got where we are. 

Read any book written on Lehman Brothers, they'll all tell you that Lehman Brothers Chairman and CEO Richard Fuld - who by the way made over $30 million the last year his company was still breathing - didn't understand the markets and what his people were doing to them and doing with them.  

And not to just pick on Dick Fuld (although a lot of people will agree with me that he deserves it), Long Term Capital Management's John Meriweather wasn't aware that his traders were hanging him out to dry.  That was the first of the almost crippling blows to the economy. 

And it should have been the first red flag that maybe, just maybe, leveraging capital (someone else's capital) to the tune of 40 to one may have been more than just a bad idea.

I don't think it is possible for people completely outside the hallowed money walls to get to the root, fix it, and keep the US afloat while they do it.  Hell, the Fed and the SEC weren't doing anything when those guys were playing fast and loose with our lives and our livlihoods, how can Senators and Congressmen begin to get a grasp now and figure it out, then make the necessary corrections?

I read in THE WEEK's Confidential Intelligence Briefing (touted as some of the most intriguing information and opinion printed in THE WEEK in the last year):

 

A new study revealed that "functional psychopaths" make better investors, [and] CEOs ... than normal people because they lack normal human emotions.

I don't know who did the study, and I don't care.  It makes a good story, doesn't it?  And those Wall Street Guys that dreamed up those products, sliced and diced credit derivatives, and sold them off in a thousand different directions, they made great investors, didn't they? Most of them? The ones we've heard about?  They made money for themselves and for the financial institutions for whom they worked. Trouble is, they made if off the backs of their countrymen, and the backs of half the world, and that's not okay with us.

But I fear the worst from those who run out screaming now that they will fix this and fix that. Why didn't they notice when it was happening? Why didn't anyone get a handle on it then?

And, really, how'd they get so much smarter here lately?

If the coffee you drink could change the world, would you change the coffee you drink?

I've just met some people that I'm really happy to know, the folks at LaEsperanza Farms, a coffee grower in Venezuela.

They have several things going for them . . . one of which is they have fresher coffee than you've ever tasted, unless you visit coffee plantations!

Whether you call it coffee, cafe, Kaffe, or a cup of joe; whether you prefer brewed, french press, cappucino, expresso, turkish, or any of the many ways it is prepared; whether you get your coffee from Starbucks™, Dunkin Donuts™, your local roaster, or the Internet, Harvest fresh coffee will give you a whole new appreciation for a fine cup of coffee.

The other thing going for them is that ALL their profits go to support African relief. that's the reason this is their logo

It is their goal to change the world. Want to help? Shop for coffees . . . delivered to your door. Fresher coffee than you've ever tasted.

Buy for your home, for your office, for gifts.

Buy it to change the face of the world.

Read in the The Wall Street Journal reports that commercial-real-estate may be ready to deliver "a roundhouse punch to the U.S. economy just as it struggles to get up off the mat." Mortgage-backed securities failing due to foreclosures brought us the 2008 financial crisis, and now $700 billion in commercial-mortgage-backed securities appear to be about to fail. The delinquency rate in was July six times the rate at the same time last year, and these loans are hard to refinance. At the close of 2012, $153 billion in loans in commercial mortgage backed securities will be due, and nearly $100 billion worth will have problems getting refinanced. Read it at The Wall Street Journal

I was shocked when Lehman Brothers was allowed to fail, and other (in my opinion lesser) Banks were saved.

From Larry McDonald's email to me about his book:

I am exposing the few that HURT so many. Over 2 million jobs lost since Lehman failed. This NEVER should have happened!

The product description on Amazon.Com says:

One of the biggest questions of the financial crisis has not been answered until now. What happened at Lehman Brothers and why was it allowed to fail, with aftershocks that rocked the global economy? In this news-making, often astonishing book, a former Lehman Brothers Vice President gives us the straight answers—right from the belly of the beast.

In A Colossal Failure of Common Sense, Larry McDonald, a Wall Street insider, reveals the culture and unspoken rules of the game like no book has ever done. The book is couched in the very human story of Larry McDonald’s Horatio Alger-like rise from a Massachusetts “gateway to nowhere” housing project to the New York headquarters of Lehman Brothers, home of one of the world’s toughest trading floors.

We get a close-up view of the participants in the Lehman collapse, especially those who saw it coming with a helpless, angry certainty. We meet the Brahmins at the top, whose reckless, pedal-to-the-floor addiction to growth finally demolished the nation’s oldest investment bank. The Wall Street we encounter here is a ruthless place, where brilliance, arrogance, ambition, greed, capacity for relentless toil, and other human traits combine in a potent mix that sometimes fuels prosperity but occasionally destroys it.

The full significance of the dissolution of Lehman Brothers remains to be measured. But this much is certain: it was a devastating blow to America’s—and the world’s—financial system. And it need not have happened. This is the story of why it did.

Can't wait to read this one!

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• The importance of saving Lehman (economist.com)

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Countrywide’s Golden Boy Angelo Mozilo said a year or two ago that within a year the top ten banks would fall to the top 5.  I wonder if he thought his would be one of the first to go, or considered he would be charged with fraud before all the dominos fell.

Since Taylor Bean & Whittaker abruptly shut down last week, I’ve considered Mozilo’s remark and the possibility that there will only be one or two banks left in the mortgage business.  Since that is their money maker, I wonder how many will be left standing at all.

A great many banks are promoting incentives for their banks; Wachovia will give you a gift for referring a new customer, if you are a customer in fact.  Bank of American and Wells Fargo, both of whom are big in online banking have ongoing bank promotions as well.

But would you really choose a bank based on bank promotions?  It is probably a good idea to make sure the bank you choose is one that will be standing after the dust clears, you do want your certificate of deposit to maintain its value, and not have to collect from the FDIC!

The Treasury Department is moving to scale down its troubled-asset program, and the Congressional Oversight Panel says that troubled assets are still parked (hidden?) in banks' balance sheets and need to be removed . . . or the economy may worsen. They want more stress tests (and we know those worked, don't we?) and want the Treasury to consider additional capital for small banks . . .

Whoa! Rep. Jeb Hensarling (R-TX), the only no vote on the Congressional Oversight Panel, doesn't think the Fed should act on this advice.

I don't either, but I don't care for his reasoning.

"It is possible that the toxic asset market is already beginning to heal itself and that the intervention proposed by the Panel could be inappropriate—if not counterproductive," he said.

Possible that it is beginning to heal . . . probable? I don't think so.

He finished with:

". . . the Treasury and the Fed continue to monitor the toxic asset market."

Because watching a house burn down is always better than putting the fire out.

~~ And in notes from all over ~~

The New York Times ponders if China's growth was fueled by aggressive, state-directed lending will it lead to lots of bad loans and mounting government debt?

“They opted for a very quick fix,” said Stephen Roach, an economist and chairman of Morgan Stanley Asia. “Surging investment, fueled by the most rapid bank lending in history, accounted for nearly 90 percent of China’s G.D.P. growth in the first half of this year. And that is worrisome.”

Again from the Times: England Bond purchases may end. When the Bank of England started their program to purchase financial assets to "bail out Britain" five months ago, it was considered highly controversial. (Evidently everyone doesn't think our money should keep bad businesses alive.) But this Thursday, their central bank policy committee votes for it to stay or go away.

Economists and investors are split. Those who favor an expansion say the plan has only marginally improved the supply of credit and more needs to be done. Those who oppose an extension say that Britain’s economy is showing signs of improvement and no further asset purchases are needed.

British Banks are posting more and more losses . . .

Government-controlled Royal Bank of Scotland, announced new losses, and set aside £7.52 billion ($12.6 billion) for potentially bad loans, more than all of 2008. And this is first half of 2009 figures we're seeing.

From the Times:

Bank executives expressed radically divergent views on whether the wave of loan losses was nearing its peak or would continue to erase profits for years to come as clients struggled to repay their debts.

“The picture has been very mixed,” said Paul Wallis, an analyst at Exane BNP Paribas in London. “There are people who want to believe that we will see a recovery and any bad news is being brushed under the carpet.” Other banks, especially R.B.S., still have a “massive leverage burden,” he said.

I grow weary of waiting for the fat lady to sing.

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• Banks miss lending targets as bad debts hit £30bn (telegraph.co.uk)

According to the Wall Street Journal, The FHA suspended Taylor, Bean & Whitaker Mortgage Corp. from making FHA loans, and "raised questions about the company's business practices and financial disclosures."

WSJ continues that TBW didn't submit a required financial report AND failed to disclose "certain irregular transactions that raised concerns of fraud."

Officials demurred from detailing the fraud, however Ocala.com reports:

The FHA said in a written statement Tuesday that Taylor Bean failed to submit its required annual financial report and failed to inform the FHA that TBW's independent auditors ended their examination of the company when they found "certain irregular transactions that raised concerns of fraud."

In addition to the loan suspension, the FHA is also recommending that two top company officials be temporarily banned from doing mortgage business with the federal government.

The FHA alleges that TBW President Ray Bowman and TBW Chief Executive Officer Paul Allen submitted false or misleading documents to the U.S. Department of Housing and Urban Development.

From the WSJ:

It seems Mr. Allen "submitted false or misleading information to Ginnie Mae concerning a delay in submitting financial reports. It said Mr. Bowman submitted two false certifications regarding information lenders are required to verify each year. Neither Mr. Allen nor Mr. Bowman could be reached for comment."

TBW bought almost $30 billion in mortgages last year and that makes it the largest lender ever suspended by the  FHA. It is a private company but Inside Mortgage Finance lists it as the 12-largest lender in the US this year.

HUD Secretary Shaun Donovan announced: "Today, we suspend one company but there is a very clear message that should be heard throughout the FHA lending world: Operate within our standards or we won't do business with you."

An email sent to employees from Chairman of the Board Lee Farkas around 1:00 pm announced the company was closing, and they were to pack up and leave.  The email included the remark that Farkas had done everything he could to save the company.  Later they issued a news release that all loan origination operations had stopped, but they will continue to service loans.

Evidently TARP, HUD and Ginnie Mae are all looking closely at the activities of TBW, the Wall Street Journal includes a comment that independent auditor, Deloitte LLP, had resigned from that position with Taylor, Bean & Whittaker because of "irregular transactions" that raised concerns about fraud. There was no comment from Deloitte. The full Wall Street Journal article Ocala.Com's full article

The Associated Press says: "The percentage of U.S. homeowners who owe more than their house is worth will nearly double to 48 percent in 2011 from 26 percent at the end of March."

Ironically, Deutsche Bank reports that "prime" loans that meet the guidelines of Fannie Mae and Freddie Mac will be the worst affected: As much as 41 percent will be underwater by the first quarter of 2011, up from 19 percent in 1Q 2009.

Good thing those loans are now available for modification - more and more people are considering the folly of paying a $500K mortgage for a $250K house.

Read the full article at AP

Fannie Mae Home Affordable Modification Program

 

Under President Obama's Mortgage Rescue Plan (Safe Harbor Mortgage Modification Bill ) 9 Million mortgages are eligible for Mortgage Loan Modification, the $75 billion program to stop foreclosure for up to four million homeowners.

Mortgage companies are paid $1,000 for each modification & another $1,000/yr for up to three years. This is crucial to the economy. Without it, foreclosures will continue to grow & real estate prices fall. But, since the program began, millions more loans have gone into foreclosure.

Take advantage of the housing rescue incentives and modify your Fannie Mae or Freddie Mac mortgage.

Take control of YOUR home loan and prepare your BANK READY Modification Package. If you have a first and second mortgage, prepare a package for both loans.

Three steps to a LOWER Mortgage Payment!!!